Camden National Corporation Reports A 24% Increase In Third Quarter 2018 Earnings

CAMDEN, Maine, Oct. 30, 2018 /PRNewswire/ — Camden National Corporation (NASDAQ: CAC; “Camden National” or the “Company”), a $4.2 billion bank holding company headquartered in Camden, Maine, reported net income for the third quarter of 2018 of $14.1 million and diluted earnings per share (“EPS”) of $0.90, representing increases over the third quarter of 2017 of 24% and 25%, respectively. For the third quarter of 2018, the Company’s return on average assets was 1.34%, return on average equity was 13.44% and efficiency ratio1 was 57.33%.

“Our ability to execute successfully on retail, business and treasury management initiatives has helped us reach a financial milestone as we report record earnings for the third quarter,” said Gregory A. Dufour, President and Chief Executive Officer of the Company. “We are very pleased with our year-to-date financial results, which include net income and diluted EPS growth of 24% over the same period last year, solid loan growth of 5%, deposit growth of 7% and strong overall asset quality across our portfolio.”

For the nine months ended September 30, 2018, the Company reported net income of $39.1 million and diluted EPS of $2.50, compared to $31.6 million and $2.02 for the same period last year, respectively. For the nine months ended September 30, 2018, the Company’s return on average assets was 1.27%, return on average equity was 12.83% and efficiency ratio was 58.14%.

For the third quarter of 2018, the Company declared a $0.30 dividend per share, which represents a $0.07 per share, or 30%, increase over the third quarter of 2017, and a dividend yield of 2.76% as of September 28, 2018 (the last business day of the third quarter).

“In July, we announced Marie McCarthy was appointed as a member of the Company’s Board of Directors,” said Dufour. “We are thrilled to have Marie join the Company. Her knowledge and experience serving as Chief Operations and People Officer of L.L.Bean will prove beneficial as we work towards our strategic goals, including strong customer satisfaction, high employee engagement and creation of long-term shareholder value. As a result of Marie’s appointment, four members of our 11-member Board of Directors are women, reflecting the Company’s commitment to diversity.”

1

This is a non-GAAP measure. Please refer to “Reconciliation of non-GAAP to GAAP Financial Measures” for further details.

THIRD QUARTER 2018 FINANCIAL HIGHLIGHTS

Net income for the third quarter of 2018 of $14.1 million increased $2.7 million, or 24%, over the third quarter of 2017 and $1.8 million, or 15%, over last quarter.

Total revenues2 for the third quarter of 2018 of $40.8 million increased $1.4 million, or 3%, over the third quarter of 2017 and $1.8 million, or 5%, over last quarter.

Total loan growth for the third quarter of 2018 and for the nine months ended September 30, 2018 was 6% on an annualized basis.

Average low-cost deposits3 for the third quarter of 2018 of $2.4 billion increased $237.7 million, or 11%, over the third quarter of 2017, and $84.5 million, or 4%, over last quarter.

FINANCIAL CONDITION

Total assets increased 3% since December 31, 2017 to $4.2 billion at September 30, 2018, driven primarily by loan growth of $126.4 million, or 5%. Loan growth for the nine months ended September 30, 2018 was led by residential mortgage growth of $83.1 million, or 10%, followed by commercial real estate loan growth of $52.0 million, or 4%, and an increase in consumer and home equity balances of $4.2 million, or 1%. At September 30, 2018, commercial loan balances decreased $12.9 million, or 3%, since December 31, 2017, largely due to the continued run-off of the Healthcare Professional Funding Corporation (“HPFC”) loan portfolio, which has decreased $8.3 million since December 31, 2017.

The Company sold $167.6 million, or 46%, of its residential mortgage production originated for the nine months ended September 30, 2018, compared to $155.2 million sold, or 51%, for the same period last year.

Total deposits increased 7% since December 31, 2017 to $3.2 billion at September 30, 2018. At September 30, 2018, low-cost deposits were 67% of the Company’s total funding, compared to 64% at December 31, 2017 and 62% at September 30, 2017. Since year end:

Demand deposits grew $85.5 million, or 18%.

Interest checking deposits grew $77.4 million, or 9%.

Brokered deposits increased $74.7 million, or 36%, as this option provided a more efficient source of short-term funding.

Total borrowings decreased 22% since December 31, 2017 to $479.5 million at September 30, 2018. The decrease in total borrowings was due to our strong deposit growth since year end and the use of brokered deposits to supplement other short-term borrowings.

At September 30, 2018, our loan-to-deposit ratio improved to 90%, compared to 93% at December 31, 2017 and September 30, 2017.

The Company’s capital position at September 30, 2018 was well in excess of regulatory requirements, including a total risk-based capital ratio of 14.55% and a Tier I leverage ratio of 9.42%. At September 30, 2018, the Company’s tangible common equity ratio1 was 7.78%.

1

This is a non-GAAP measure. Please refer to “Reconciliation of non-GAAP to GAAP Financial Measures” for further details.

Net income for the third quarter of 2018 was $14.1 million, an increase of $2.7 million over the third quarter of 2017. Diluted EPS increased 25% over the same period to $0.90 for the third quarter of 2018.

Income tax expense for the third quarter of 2018 decreased $2.2 million to $3.2 million compared to the third quarter of 2017, primarily due to the decrease in the federal corporate income tax rate, effective January 1, 2018.

Total revenue for the third quarter of 2018 was $40.8 million, an increase of 3% over the same period last year. The increase was led by net interest income growth of $1.3 million, or 4%, to $30.4 million, while non-interest income increased 1% over the same period to $10.4 million.

Net interest income growth for the third quarter of 2018 over the same period last year was driven by average loan growth of $136.2 million, or 5%, and strong average deposit growth of $264.7 million, or 10%. As funding costs are on the rise, generating low-cost deposits continues to be a focus, highlighted by demand and interest checking average deposit growth of $204.4 million, or 17%, and average money market growth of $43.2 million, or 9%.

Net interest margin on a fully-taxable basis for the third quarter of 2018 decreased two basis points to 3.14% compared to the third quarter of 2017. The decrease in net interest margin on a fully-taxable basis between periods was due to lower accretion income on acquired loans and time deposits, and the decrease in the federal corporate income tax rate, which lowered the tax-equivalent yield for certain loans and investments.

Non-interest income totaled $10.4 million for the third quarter of 2018, compared to $10.3 million for the third quarter of 2017. Most fee categories were higher for the third quarter of 2018 compared to the same period of 2017, including debit card income, service charges, and other income, while mortgage banking income for the third quarter of 2018 decreased 15% over the same period.

The provision for credit losses for the third quarter of 2018 was $354,000, or 5 basis points of average loans for the quarter on an annualized basis, compared to $817,000 for the third quarter of 2017, or 12 basis points of average loans for the quarter on an annualized basis. The decrease in provision for credit losses was driven primarily by improvements in asset quality:

The non-performing loans to total loans ratio at September 30, 2018 was 0.65%, compared to 0.72% at September 30, 2017.

The third quarter 2018 annualized net charge-offs to average loans ratio was 0.07%, compared to 0.11% for the third quarter of 2017.

Criticized and classified loans decreased $15.4 million, or 23%, since September 30, 2017 to $52.4 million at September 30, 2018.

Non-interest expense for the third quarter of 2018 was $23.2 million, compared to $21.8 million for the same period last year. The increase of $1.3 million, or 6%, between periods was driven primarily by an increase in salaries and employee benefits expense of 8% due to merit increases, ongoing wage inflation and strategic hires. Our efficiency ratio for the third quarter of 2018 was 57.33% compared to 55.72% for the third quarter of 2017.

OPERATING RESULTS (Linked Quarter)

Net income for the third quarter of 2018 increased $1.8 million, or 15%, and diluted EPS increased $0.12, or 15%, compared to the previous quarter. The increase between periods was led by revenue growth of $1.8 million and a lower provision for credit losses of $629,000, but was partially offset by higher non-interest expense of $271,000.

Total revenue for the third quarter of 2018 increased 5% over last quarter due to net interest income growth of $942,000, or 3%, and an increase in non-interest income of $891,000, or 9%.

Net interest income growth for the third quarter of 2018 over last quarter was the result of average loan growth of $71.3 million, or 3%, and average deposit growth of $92.9 million, or 3%.

Net interest margin on a fully-taxable equivalent basis for the third quarter of 2018 was 3.14%, compared to 3.10% last quarter, as the yield on average earnings assets increased seven basis points between quarters while our cost of funds increased four basis points. In the third quarter of 2018, we experienced our seasonal growth in low-cost deposits, which resulted in lowering borrowing levels.

Non-interest income increased $891,000 in the third quarter of 2018 compared to last quarter due to an increase in investment security gains of $633,000, an increase in mortgage banking income of $149,000 and an increase in loan swap fee income of $108,000.

The provision for credit losses decreased $629,000 for the third quarter of 2018 compared to last quarter. The loan portfolio saw favorable migration in the third quarter of 2018 as criticized and classified loans decreased $4.6 million between quarters, and our non-performing loans to total loans ratio decreased four basis points between quarters.

Non-interest expense increased 1% between quarters to $23.2 million for the third quarter of 2018. Salaries and employee benefits costs was the primary driver, increasing 3% between quarters, largely due to strategic hires, seasonal summer employees and an increase in incentive compensation, reflective of our strong year-to-date performance.

CONFERENCE CALL

Camden National will host a conference call and webcast at 3:00 p.m., Eastern Time, on Tuesday, October 30, 2018 to discuss its third quarter 2018 financial results and outlook. Participants should dial in to the call 10 – 15 minutes before it begins. Information about the conference call is as follows:

A link to the live webcast will be available on Camden National’s website under “Investor Relations” at www.CamdenNational.com prior to the meeting, and a replay of the webcast will be available on Camden National’s website following the conference call. The transcript of the conference call will also be available on Camden National’s website approximately two days after the conference call.

ABOUT CAMDEN NATIONAL CORPORATION

Camden National Corporation (NASDAQ:CAC), headquartered in Camden, Maine, is the largest publicly traded bank holding company in Northern New England with $4.2 billion in assets and nearly 650 employees. Camden National Bank, its subsidiary, is a full-service community bank founded in 1875 that offers an array of consumer and business financial products and services, accompanied by the latest in digital banking technology to empower customers to bank the way they want. The Bank provides personalized service through a network of 60 banking centers, 71 ATMs, and lending offices in New Hampshire and Massachusetts, all complemented by 24/7 live phone support. 2017 marked the eighth time Camden National Bank received the “Lender at Work for Maine” Award from the Finance Authority of Maine. Comprehensive wealth management, investment, and financial planning services are delivered by Camden National Wealth Management. To learn more, visit www.CamdenNational.com. Member FDIC.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this press release that are not statements of historical fact constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, including certain plans, expectations, goals, projections and other statements, which are subject to numerous risks, assumptions and uncertainties. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words like “believe,” “expect,” “anticipate,” “estimate,” and “intend” or future or conditional verbs such as “will,” “would,” “should,” “could” or “may.” Certain factors that could cause actual results to differ materially from expected results include increased competitive pressures; changes in the interest rate environment; changes in general economic conditions; operational risks including, but not limited to, cybersecurity, fraud and natural disasters; legislative and regulatory changes that adversely affect the business in which Camden National is engaged; changes in the securities markets and other risks and uncertainties disclosed from time to time in in Camden National’s Annual Report on Form 10-K for the year ended December 31, 2017, as updated by other filings with the Securities and Exchange Commission (“SEC”). Camden National does not have any obligation to update forward-looking statements.

USE OF NON-GAAP MEASURES

In addition to evaluating the Company’s results of operations in accordance with generally accepted accounting principles in the United States (“GAAP”), management supplements this evaluation with certain non-GAAP financial measures, such as return on average tangible equity; the efficiency and tangible common equity ratios; and tangible book value per share. Management utilizes these non-GAAP financial measures for purposes of measuring our performance against our peer group and other financial institutions and analyzing our internal performance. We also believe these non-GAAP financial measures help investors better understand the Company’s operating performance and trends and allow for better performance comparisons to other financial institutions. In addition, these non-GAAP financial measures remove the impact of unusual items that may obscure trends in the Company’s underlying performance. These disclosures should not be viewed as a substitute for GAAP operating results, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other financial institutions. Reconciliation to the comparable GAAP financial measure can be found in this document.

ANNUALIZED DATA

Certain returns, yields and performance ratios are presented on an “annualized” basis. This is done for analytical and decision-making purposes to better discern underlying performance trends when compared to full-year or year-over-year amounts. Annualized data may not be indicative of any four-quarter period, and are presented for illustrative purposes only.

Selected Financial Data

(unaudited)

At or For The

Three Months Ended

At or For TheNine Months Ended

(In thousands, except number of shares and per share data)

September 30, 2018

June 30, 2018

September 30, 2017

September 30, 2018

September 30, 2017

Financial Condition Data

Investments

$

890,177

$

918,404

$

916,018

$

890,177

$

916,018

Loans and loans held for sale

2,919,001

2,880,185

2,761,287

2,919,001

2,761,287

Allowance for loan losses

23,526

23,668

24,413

23,526

24,413

Total assets

4,191,584

4,193,782

4,039,943

4,191,584

4,039,943

Deposits

3,220,755

3,056,119

2,956,413

3,220,755

2,956,413

Borrowings

479,498

661,393

608,607

479,498

608,607

Shareholders’ equity

417,525

409,939

414,366

417,525

414,366

Operating Data

Net interest income

$

30,423

$

29,481

$

29,160

$

88,806

$

85,641

Provision for credit losses

354

983

817

840

2,797

Non-interest income

10,392

9,501

10,299

28,697

28,759

Non-interest expense

23,166

22,895

21,825

68,365

65,411

Income before income tax expense

17,295

15,104

16,817

48,298

46,192

Income tax expense

3,238

2,887

5,478

9,204

14,543

Net income

$

14,057

$

12,217

$

11,339

$

39,094

$

31,649

Key Ratios

Return on average assets

1.34

%

1.19

%

1.12

%

1.27

%

1.07

%

Return on average equity

13.44

%

12.10

%

10.93

%

12.83

%

10.49

%

Net interest margin

3.14

%

3.10

%

3.16

%

3.11

%

3.16

%

Non-performing loans to total loans

0.65

%

0.69

%

0.72

%

0.65

%

0.72

%

Non-performing assets to total assets

0.46

%

0.48

%

0.50

%

0.46

%

0.50

%

Annualized net charge-offs to average loans

0.07

%

0.04

%

0.11

%

0.07

%

0.07

%

Tier I leverage capital ratio

9.42

%

9.30

%

9.01

%

9.42

%

9.01

%

Total risk-based capital ratio

14.55

%

14.33

%

14.09

%

14.55

%

14.09

%

Per Share Data

Basic earnings per share

$

0.90

$

0.78

$

0.72

$

2.50

$

2.03

Diluted earnings per share

$

0.90

$

0.78

$

0.72

$

2.50

$

2.02

Cash dividends declared per share

$

0.30

$

0.30

$

0.23

$

0.85

$

0.69

Book value per share

$

26.79

$

26.32

$

26.71

$

26.79

$

26.71

Weighted average number of common shares outstanding

15,580,782

15,572,848

15,515,189

15,565,355

15,505,698

Diluted weighted average number of common shares outstanding

15,638,986

15,629,779

15,589,008

15,621,400

15,580,072

Non-GAAP Measures(1)

Return on average tangible equity

17.84

%

16.23

%

14.85

%

17.15

%

14.40

%

Efficiency ratio

57.33

%

58.39

%

55.72

%

58.14

%

56.80

%

Tangible common equity ratio

7.78

%

7.59

%

7.98

%

7.78

%

7.98

%

Tangible book value per share

$

20.43

$

19.94

$

20.26

$

20.43

$

20.26

(1)

Please see “Reconciliation of non-GAAP to GAAP Financial Measures (unaudited).”

Balances for the three months ended September 30, 2017 were revised to include average interest-bearing deposits in other banks in total average interest-earning assets. Previously, average interest-bearing deposits in other banks was presented in other assets.

(2)

Reported on a tax-equivalent basis using the corporate federal income tax rate in effect for the period, including certain commercial loans.

(3)

Non-accrual loans and loans held for sale are included in total average loans.

(4)

Excludes the impact of the fair value mark accretion on loans and certificates of deposit generated in purchase accounting and collection of previously charged-off acquired loans for the three months ended September 30, 2018, June 30, 2018 and September 30, 2017 totaling $434,000, $578,000 and $804,000, respectively.

Balances for the nine months ended September 30, 2017 were revised to include average interest-bearing deposits in other banks in total average interest-earning assets. Previously, average interest-bearing deposits in other banks was presented in other assets.

(2)

Reported on a tax-equivalent basis using the corporate federal income tax rate in effect for the period, including certain commercial loans.

(3)

Non-accrual loans and loans held for sale are included in total average loans.

(4)

Excludes the impact of the fair value mark accretion on loans and certificates of deposit generated in purchase accounting and collection of previously charged-off acquired loans for the nine months ended September 30, 2018 and 2017 totaling $1.6 million and $2.5 million, respectively.

Asset Quality Data

(unaudited)

(In thousands)

At or For TheNine Months Ended September 30, 2018

At or For TheSix Months Ended June 30, 2018

At or For TheThree Months Ended March 31, 2018

At or For TheYear Ended December 31, 2017

At or For TheNine Months Ended September 30, 2017

Non-accrual loans:

Residential real estate

$

4,720

$

5,742

$

6,185

$

4,979

$

4,465

Commercial real estate

5,517

5,600

4,603

5,642

5,887

Commercial

2,402

1,934

1,991

2,000

1,830

Consumer

1,647

1,700

1,464

1,650

1,626

HPFC

591

834

655

1,043

838

Total non-accrual loans

14,877

15,810

14,898

15,314

14,646

Loans 90 days past due and accruing

14

—

—

—

—

Accruing troubled-debt restructured loans not included above

4,039

4,000

4,361

5,012

5,154

Total non-performing loans

18,930

19,810

19,259

20,326

19,800

Other real estate owned

185

130

130

130

341

Total non-performing assets

$

19,115

$

19,940

$

19,389

$

20,456

$

20,141

Loans 30-89 days past due:

Residential real estate

$

3,816

$

2,222

$

2,777

$

5,277

$

3,169

Commercial real estate

574

309

1,121

1,135

2,297

Commercial

723

1,490

243

518

712

Consumer

902

1,258

1,190

1,197

1,256

HPFC

1,078

455

528

887

938

Total loans 30-89 days past due

$

7,093

$

5,734

$

5,859

$

9,014

$

8,372

Allowance for loan losses at the beginning of the period

$

24,171

$

24,171

$

24,171

$

23,116

$

23,116

Provision (credit) for loan losses

845

490

(500)

3,026

2,786

Charge-offs:

Residential real estate

231

116

31

482

433

Commercial real estate

512

512

426

124

81

Commercial

448

298

171

1,014

650

Consumer

451

266

175

558

493

HPFC

209

—

—

290

274

Total charge-offs

1,851

1,192

803

2,468

1,931

Total recoveries

(361)

(199)

(122)

(497)

(442)

Net charge-offs

1,490

993

681

1,971

1,489

Allowance for loan losses at the end of the period

$

23,526

$

23,668

$

22,990

$

24,171

$

24,413

Components of allowance for credit losses:

Allowance for loan losses

$

23,526

$

23,668

$

22,990

$

24,171

$

24,413

Liability for unfunded credit commitments

15

16

23

20

22

Allowance for credit losses

$

23,541

$

23,684

$

23,013

$

24,191

$

24,435

Ratios:

Non-performing loans to total loans

0.65

%

0.69

%

0.69

%

0.73

%

0.72

%

Non-performing assets to total assets

0.46

%

0.48

%

0.47

%

0.50

%

0.50

%

Allowance for loan losses to total loans

0.81

%

0.83

%

0.82

%

0.87

%

0.89

%

Net charge-offs to average loans (annualized):

Quarter-to-date

0.07

%

0.04

%

0.10

%

0.07

%

0.11

%

Year-to-date

0.07

%

0.07

%

0.10

%

0.07

%

0.07

%

Allowance for loan losses to non-performing loans

124.28

%

119.48

%

119.37

%

118.92

%

123.30

%

Loans 30-89 days past due to total loans

0.24

%

0.20

%

0.21

%

0.32

%

0.30

%

Reconciliation of non-GAAP to GAAP Financial Measures (unaudited)

Return on Average Tangible Equity:

For theThree Months Ended

For theNine Months Ended

(In thousands)

September 30,

2018

June 30,

2018

September 30,

2017

September 30,

2018

September 30,

2017

Net income, as presented

$

14,057

$

12,217

$

11,339

$

39,094

$

31,649

Add: amortization of intangible assets, net of tax(1)

144

143

307

430

921

Net income, adjusted for amortization of intangible assets

$

14,201

$

12,360

$

11,646

$

39,524

$

32,570

Average equity, as presented

$

414,936

$

404,874

$

411,497

$

407,524

$

403,195

Less: average goodwill and other intangible assets

(99,195)

(99,377)

(100,273)

(99,379)

(100,746)

Average tangible equity

$

315,741

$

305,497

$

311,224

$

308,145

$

302,449

Return on average tangible equity

17.84

%

16.23

%

14.85

%

17.15

%

14.40

%

Return on average equity

13.44

%

12.10

%

10.93

%

12.83

%

10.49

%

(1)

Reported on a tax-equivalent basis using the corporate federal income tax rate in effect for the respective period.

Efficiency Ratio:

For the

Three Months Ended

For theNine Months Ended

(In thousands)

September 30, 2018

June 30, 2018

September 30, 2017

September 30, 2018

September 30, 2017

Non-interest expense, as presented

$

23,166

$

22,895

$

21,825

$

68,365

$

65,411

Net interest income, as presented

$

30,423

$

29,481

$

29,160

$

88,806

$

85,641

Add: effect of tax-exempt income(1)

260

257

535

771

1,580

Non-interest income, as presented

10,392

9,501

10,299

28,697

28,759

Less: net gain on sale of securities

(664)

(31)

(827)

(695)

(827)

Adjusted net interest income plus non-interest income

$

40,411

$

39,208

$

39,167

$

117,579

$

115,153

Non-GAAP efficiency ratio

57.33

%

58.39

%

55.72

%

58.14

%

56.80

%

GAAP efficiency ratio

56.76

%

58.73

%

55.31

%

58.18

%

57.18

%

(1)

Reported on a tax-equivalent basis using the corporate federal income tax rate in effect for the respective period.